What happens when owners in a business become concerned about a dispute regarding shareholders’ rights? A men’s clothier was recently under fire from some of its investors. The entity that holds the largest portion of the company’s public stock filed paperwork with the Securities and Exchange Commission stating an intention to hold a meeting concerning the possibility of replacing board members since it is believed that shareholders’ rights were being undermined. While this latest saga is not being played out in California, businesses everywhere are frequently required to consider the best interests of all parties involved, including their shareholders.
In this case, a shareholder filed a notice with the SEC stating that the company allowed a deadline to pass unanswered concerning another company’s desire to explore a merger. The shareholder wanted to seek changes in management. The clothier in question received an inquiry from one of its largest competitors establishing a sum of just over $47.50 per share if the companies were to merge. The board of directors was accused of inaction that may have harmed the existing shareholders’ ability to increase their earnings from the company.
One of the minority owners who was concerned about a dispute regarding shareholders’ rights started a process by which they hoped to be able to change the company’s leadership. However, while this stockholder was unhappy with the decision to ignore the competitor, there were others who had spoken in support of the company’s decision to permit the deadline to pass. It has been reported that the competing business asked to see confidential financial statements before it pursued a serious buyout offer. One business observer indicated that the clothier in question made the correct move in ignoring that request.
The offer has since been withdrawn, but this example holds an important lesson for San Diego shareholders:
After more than 40 years of experience, I can tell you shareholders and investors must be vigilant and proactive when it comes to protecting their investments and asserting their rights to protect that investment.
Many companies in California are most likely no stranger to conflicts between stockholders and management. However, if there appear to be any signs that minority shareholders’ rights are not being protected or properly considered, then there are legal options available to shareholders that can protect their interests. Not all mergers and acquisitions are as they seem to be on the surface. We’ve seen attempts to water down or altogether eliminate the value and influence of minority shareholders through a merger or acquisition. This is why it is important to work with the experienced shareholder dispute and business litigation attorneys at the Watkins Firm. We will help to ensure your stake in the corporation is represented and duly acknowledged when business options that may affect your interests are being considered.
Are you concerned about your interests as a shareholder or investor? We invite you to review our podcast Episode 14 – Shareholders’ Rights and Disputes as well as the strong recommendations of our clients and contact the Watkins Firm or call 858-535-1511 for a complimentary consultation today.
